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Xinfei Electric Co Ltd is expected to post sales of 4 billion yuan (US$512 million) this year, and is poised to expand its share of the high-end refrigerator market.

As the second-largest refrigerator maker after Haier and the biggest single Chinese investment of Singaporean firm Hong Leong Asia Ltd, Xinfei is also preparing to expand its global presence.

Teo Tong Kooi, CEO of Hong Leong Asia and chairman of Xinfei, said the Chinese firm will achieve sales of 4 billion yuan (US$513 million) this year. In the first 11 months, it sold 3 million refrigerators to surpass the total in 2005.

"Many people say that home appliances have such a low profitability that it is not enough to survive, but for us, with 4 billion yuan (US$513 million) in sales and 5 percent net profit, that already is a good business," Teo said.

Xinfei is the flagship Chinese investment of the richest Singaporean Kwek Leng Beng's Hong Leong Group. It is also a major investor in New York Stock Exchange-listed Yuchai International, the biggest independent Chinese diesel engine maker, and runs a packaging business.

While international appliance giants like General Electric, Siemens and Electrolux are either absent from the Chinese market or are struggling against local competitors, Hong Leong Asia has become one of China's most successful foreign investors.

In 1994, Hong Leong Asia acquired 51 percent of stakes in Xinfei Electric Co Ltd in Central China's Henan Province. In February, it spent US$52 million to boost its holdings to 90 percent. Xinfei's shipments rose from half a million units in 1994 to almost 4 million in 2006, during which time its market ranking rose from eighth to second.

The shipment of refrigerators in China rose by more than 30 percent in the first 10 months over the same period, according to the securities research house TX Investment Consulting Co Ltd.

Teo said partnership is key to his firm's success in the Xinfei investment. "We want to be seen as a partner by letting the local partner hold some shares, rather than making it a wholly owned subsidiary," Teo said.

In October, the company started its production capacity expansion, which is expected to cost about 2 billion yuan (US$256 million) and almost double Xinfei's annual production capacity to 6 million units.

Xinfei is likely to increase annual sales by 3 billion yuan (US$384 million) after the expansion is completed in June 2007.

However, the refrigerator maker will make some changes to shift to an upper level of the value chain.

During its first 10 years of investment in Xinfei, Hong Leong largely remained an investor only. In 2004, it began building an international management team at the company, bringing in a new chief operating officer and new marketing executives.

Hong Leong wanted to bring the international market operation experience of the executives to Xinfei, because international expansion and reaching the high-end segment are two of the company's major goals.

In early December, Xinfei unveiled some 20 new models for 2007. More than a half of them target the high-end market with prices higher than 3,000 yuan (US$384) per unit.

Currently, the high-end segment is dominated by international brands like Siemens, Samsung Electronics and LG Electronics.

"The demand for side-by-side refrigerators is not big in China, but we must prepare for the demands in three to five years," Teo said.

This year, revenues from overseas markets are expected to account for 15 percent of Xinfei's total.

(China Daily December 27, 2006)